KUALA LUMPUR, March 2 ― Manufacturing activities are likely to be quite arduous in the near term, mainly due to the Russia-Ukraine crisis, surging commodity prices, elevated Covid-19 cases as well as the ongoing raw materials and labour shortages, Kenanga Research house said.

Although the research house has maintained its 2022 gross domestic product forecast at 5.5 per cent-6.0 per cent, it noted that there is a high probability of revising its projection downwards in the near term.

In a note today, it said the manufacturing purchasing managers' index (PMI) expanded to a two-year high of 50.9 in February from 50.5 in January; reflecting the resumption of manufacturing activities despite being pressured by the ongoing raw material shortages and higher freight costs.

"Optimism remained relatively high for the eighth consecutive month, driven by hopes that the Covid-19 pandemic would recede along with the broad recovery in demand, while the employment rate fell in February due to the lack of available foreign workers,” it said.

Meanwhile, Public Investment Bank is cautious on the near-term outlook for the manufacturing sector, given the unresolved supply chain issues.

"This may affect output directly, especially for critical parts like chips which are widely used in almost all manufacturing products, from vehicles to electrical and electronics.

"This could also be weighed by Covid-19, given the intensifying Omicron wave, apart from the labour shortages which could take time to resolve,” it said in a note.

The investment bank noted that sentiments could also be affected by the start of the United States-China Trade Talk ― although it has been put in the back burner for now ― as well as the volatility in Asean currencies due to the interest rate lift off in advanced economies.

On the other hand, MIDF Investment believes that Malaysia's manufacturing activities would benefit from the continued recovery in domestic spending activities, as well as rising international demand.

"Despite the resurgence in Covid-19 cases, we expect production and business activities will continue due to the high vaccination rate.

"Nevertheless, we view prolonged global supply bottlenecks and high commodity prices in light of the recent geopolitical crisis as factors which could affect Malaysia’s export and manufacturing activities in the coming months,” it said. ― Bernama